Audit Finds 23 'Significant' Problems at PERF

July 9, 2004 (PLANSPONSOR.com) - The audit of
Indiana's public pension fund found some significant and
alarming problems, but the Public Employees' Retirement Fund
(PERF) executive director said retirees should not
worry.

The State Board of Accounts audit of the $11 billion
public pension fund found 23 significant problems with the
fund, which serves more than 500,000 public employees,
retirees and their families, the Indianapolis Star is
reporting.
Among the auditor’s findings:

some accounts have not been balanced in years,
leading to huge discrepancies

there was an absence of reviews and approvals for
transactions, accounting entries and benefits issued to
retirees

there was little segregation of duties, meaning the
same person could issue, record and mail a check.

However, the auditors said some of the most alarming are
problems found with the amount of money retirees are or
should be getting. The auditors found 19% of those retiree
accounts that were tested were not getting the correct
monthly benefit.

There were many issues found to be the cause of these
discrepancies.
Auditors found 20% of retirements and refunds that they
checked did not receive credit for their final
contribution.
Also, payouts for retirees who were once receiving
disability pensions were not correct, while others did not
get the right death benefit.

Craig Hartzer, the executive director of PERF, told the
Indianapolis Star his staff is aware of the issues and is
taking steps to make corrections.
“If I were a retiree I would be confident of two things,”
Hartzer said. “That PERF is doing everything it can to get
pension checks out on time and in the correct amount and
that they can count on us fixing any problem and making
sure it doesn’t happen again.”

Significant Contribution

Auditors said the significant problems with the fund
contributed to the “willful” wrongdoing of two employees in
separate incidents.
One such instance involved former PERF
chief benefits officer (CBO) and convicted identity
thief Walter Kevin Scott.
Scott
pleaded guilty to one count of misusing a Social
Security number, two counts of bank fraud and 20 counts of
illegal monetary transactions andwas sentenced to 10 years in prison in December
2003(See
Former PERF CBO Scott Gets 10 Years Behind
Bars
).
Another instance involved one of Scott’s former
employees, Shaunna Stone, who pleaded guilty to a single
count of bank fraud and 13 counts of misusing the Social
Security numbers of other people (See
Former Indiana Pension Worker Pleads Guilty
to Fraud Charges
). Stone had previously worked in the same benefits
department headed by Scott.

PERF has since modified its background check policy
so that it covers every current and new worker, which will
be put into place soon.
Hartzer said PERF has plans to hire
an additional 20 employees, to bring the total
pension staff to 127. Additionally, the fund will be
spending an additional $3 million in administrative costs
in the coming budget year.